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Bitcoin slides as China's central bank launches checks on exchanges (reuters.com)
170 points by stevewilhelm 313 days ago | hide | past | web | 185 comments | favorite

As someone who spent a year or so trading bitcoin for fun.

1) It's a mostly unregulated market full of scammers and pump and dump schemes artificially manipulating the price.

2) All the news and rumors about bitcoin and any other crypto currency should be assumed to a lie propagated by someone to move the price in one direction or another.

3) Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about, and if they didn't they wouldn't be posting about it online.

4) As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

5) When you suddenly start paying attention to bitcoin because the price has gone up a bunch recently, don't buy it, because it's about to crash.

> 3) Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about, and if they didn't they wouldn't be posting about it online.

I'm not one of these people or know any of them, so you might very well be right.

In general, though, there are usually a (small) number of people observing any field who should be doing professional analysis work, but who don't "think they could do that sort of thing" or think it "takes someone way smarter than them." They have too low an opinion of their own knowledge to think it has value. So, instead, they go on giving away extremely high-value market analysis for free in the comments section of some blog.

Sure, out of 100 people offering explanations on line, one or two have a clue. Good luck figuring out who it is, though.

Do you have an example of that?

Dr. Michael Burry is a pretty good example. Wrote more and more detailed and excellent analysis of stocks on forums. Wound up getting enough attention he started a hedge fund, Scion Capital. Was possibly the first to recognize the CDO disaster. He's a main character in The Big Short. The book has a fair amount of detail about the guy.

I've read through many of Michael Burry's old (early-mid 2000s) forecasts on the Value Investors Club forums, and I have to say, I'm not as impressed as the hype would suggest. Don't get me wrong, he's clearly very intelligent and understands the underlying theory. But a lot of the legend ascribed to him is less impressive when you consider the fact that shorting a market/security requires being more than just right, it requires being right at the right time. It's not enough to say, "We're in a tech bubble!" or, "We're in a housing bubble!"; any number of credible analysts is doing this all the time - what is actually difficult, and consequently profitable, is to forecast both the correct trend and the correct time in which the market will collectively "realize" the trend. On a long enough timeline, any reasonable forecast can be vindicated. 18 months, 12 months - not even six months is a sufficiently narrow slice of time for forecasting a market correction. I see a lot of people (not necessarily you) using Burry as an ideological example of someone who stood up to Wall St and beat them at their own game. The narrative of Burry as a heroic figure who beat a bunch of traders and hedge funds through superlative intellectual prowess scratches a fundamental underdog itch in storytelling (and for some, it also appeases a political ideation about Wall St as well). But I think the evidence that he could really pinpoint exactly when the crash would happen is inconclusive at best.

As one example, we can look at the forecast Burry is best known for, from The Big Short (and the corollary film depiction), and I found myself identifying much more with Michael Burry's investors than those who praised him at the end of the story. Scion Capital was hemorrhaging its investors' money, and for a nontrivial amount of time even after it became widespread knowledge among the institutional elite, the market failed to crash and vindicate Burry's short. From Burry's perspective, everyone around him thought he was wrong, but this misses a lot of the nuance. His fund's investors weren't necessarily concerned with him being right or wrong per se, they were concerned with the ridiculously inane risk he decided to take with the entirety of the firm's capital. It's great that his bet turned out so well for him, but calling it genius (as many do) is so charitable as to be almost literally incredible. Michael Burry could have easily been right but unlucky, and simply run out of capital before he could make a return on the short. This is why the saying, "The market can stay irrational longer than you can stay solvent" is so important.

Look at this from the perspective of Burry's investors, not the retrospective story of Burry's victory. If you were an investor in a hedge fund, and one day out of the blue the CEO emailed to inform you that the entirety of the fund's capital would be liquified to leverage a single market position, and that you would not be allowed to withdraw any of your capital, would you react with approval, lukewarm disinterest or abject horror? Even if you bought fully into Burry and his strategy, would you have the requisite nerve to be comfortable with such an astronomically risky and contrarian position?

That said, one of the things that impressed me most about Burry is that he could withstand such intense and prolonged pressure from both investors (harassing, suing and ostracizing him) and significant financial loss (albeit ultimately unrealized). It takes incredible fortitude to be able to lose that much capital in the pursuit of a positive return.

Fantastic comment. Burry is obviously a really intelligent guy, but what he did was absolutely insane, and it's important that people realize that.

People can make correct predictions, but there are tons of nuances around them. You could have predicted the Note 7 disaster, but Samsung's stock is up 27% from its pre-incident price. Maybe you knew about VW's problems years ago. Oh, too bad, their stock is up over 50% since 2011. Oh, you knew about the Toyota mat problems? That entire incident amounted to a nearly invisible blip on the stock price.

Betting nearly a billion dollars of other peoples' money on one single thing is absolutely insane. There are a million ways to be completely right and still lose everything.

Or, you could have known all those things, and you could realize that ever since Intel and the Pentium bug in the 1990s, that correctable product defects--even those requiring massive recalls and which are reputation-damaging--are more often than not buying opportunities for stocks with large market caps and low PE ratios.

Not disagreeing with your points about the million ways you can be right (and be unable to execute on it), though. Just that there are about a billion ways to be wrong, and a lot of those come from not taking a broad enough perspective about the impact. Burry did the research, saw the systemic complexity and dominoes that would fall, which perhaps gave him a little more confidence than a CNBC blowhard just looking at some new high in home buying and calling a market top. But he absolutely could have been wrong if he executed poorly.

The price crashed today because the BOC visited BTCC. I think that's obvious.

> The price crashed today because the BOC visited BTCC. I think that's obvious

This is a good hypothesis, but it is far from obvious.

I remember, years ago, unwinding a portfolio of correlation trades. The trades consisted of bets on how assets would correlate, e.g. Apple might be expected to correlate with Microsoft more than with Société Générale, a French bank. We were under a time crunch to unwind the massive portfolio. Given the structure of the trades, unwinding them meant reversing their implied correlations. Thus, for one week, the market's largest names anti-correlated with reference to how a few traders had previously thought they should have correlated. The moves were noticeable; the attribution far from obvious. Nevertheless, talking heads proceeded to breathlessly blame political crises in Spain.

To properly attribute this Bitcoin activity to the People's Bank of China, one would want to examine country-level Bitcoin flows of funds around the time of the PBoC announcement, paying attention to hourly data around when the Chinese- and English-language announcements were made/leaked.

None of that has anything to do with bitcoin and the PBoC news. This is the third time this week where PBoC news came out and the price tanked immediately. Whether this is fear over the PBoC, or fear of fear over the PBoC, doesn't matter to the point at hand.

The issue here is that the real data is known, intimately, by exchanges. The rest of us speculate.

These moves are mostly retrenchment and speculative/sentimental response to China messaging though. Consider -- if there was real, imminent concern that Chinese exchanges might be shut down and funds frozen, would the price at these exchanges fall or rise?

It would rise, because getting BTC out is going to be far safer than fiat.

Maybe. Who knows. Maybe it's just a profit taking retreat. Markets in the short term are generally just a random walk.

Doesn't most of this apply to financial markets in general, not just specifically bitcoin? The only obv exception being that they are "regulated" although that is also arguable.

I think you answered your own question with the obv answer - most financial markets are regulated.

We can argue that the market price of something is already reflective this risk from regulation (or lack thereof) but that would require everyone in the market to be perfectly informed.

As this person said, there is plenty misinformation being spread by rational actors who stand to benefit from Bitcoin price manipulation. In other financial markets there are at least some restrictions on this type of behavior, like insider trading, etc.

What "regulation" would prevent Bitcoin's volatility? The fact of the matter is that most of Bitcoin's value is speculative, and therefore extremely volatile, and it will be that way until large numbers of things can be bought at static Bitcoin prices (not converted Bitcoin at the current BTC/USD exchange rate). Tying assets to tangible value is the only way to add price hysteresis to any fiat instrument, including fiat currencies like US dollars. If there weren't millions of things you could buy for a fixed price in USD, you had better believe it would show the same volatility.

People like to throw around the talking point that "markets need to be regulated", but the analysis stops there. Don't be so quick to regulate without an idea of why/if it's necessary, or what the true effects of the regulation would be. A regulation should be a response to a well-defined problem (defined as an encroachment of someone's liberty, whether specific or the public at large) with a known cause, such that the regulation maximizes overall freedom. At least, in a fair system.

Regulating the supply so that it's not a deflationary currency would solve some of Bitcoin's volatility issues.

You can counter by saying, "It's not designed that way" but Bitcoin is designed to accept whatever forks a concensus of miners accept, so it is possible.

> Regulating the supply so that it's not a deflationary currency would solve some of Bitcoin's volatility issues.

Please elaborate/provide evidence. I have never heard of such a link or economic property that would demonstrate that volatility is impacted by the sign of the inflation rate.

And of course, miners already influence the money supply by choosing to sell or hold their supply, so they act as a decentralized form of the ECB/Fed/etc. Their less influential 'monetary policy' is probably much less harmful as well.

And it's important to understand what deflation is -- Bitcoin only appreciates when people assign more value to it. All things being equal, Bitcoin is NOT deflationary, whereas the USD is inflationary, because even with 100% adoption the USD supply is artificially increased, and the value eroded.

>I have never heard of such a link or economic property that would demonstrate that volatility is impacted by the sign of the inflation rate.

Then you must have been asleep during economics class when they covered the great depression.

Most modern currencies are inflationary and have taken steps to remove deflationary properties like the gold standard, because it exasperates volatility and economic bubbles. It promotes hoarding, which decreases liquidity and increases volatility.

It's exactly why quantitative easing is used to increase supply of money in order to maintain a specific range on inflation.

> Then you must have been asleep during economics class when they covered the great depression.

Personal attacks are no substitute for content and explanation; I'm trying to help you by giving a chance to better expound your original point.

For your own understanding, I would recommend reading the Monetarist explanation of the Great Depression: https://fee.org/articles/money-in-the-1920s-and-1930s/. There is also the Austrian Economics approach which is built around the fact that inflation was promoted to keep commodity values constant -- in reality, I think both Monetarist and Austrian economic factors played a role.

Most likely, I would guess the issue is that you don't understand the definition of volatility: https://en.wikipedia.org/wiki/Volatility_(finance)#Mathemati...

Please review these materials and explain how price volatility is related to the sign of inflation, or whether you meant something else. My assumption is that it is not, and I have seen no evidence to suggest otherwise. You can look at the most volatile years of US exchange rates and they were during the Jimmy Carter "stagflationary" era. You may be conflating volatility of a currency with volatility of other measures in an economy.

sure, there is some regulation (definitely more than in the btc world), but even that doesn't prevent things like the goldman sachs deal back in 2008 from happening. the point I'm trying to make - financial markets in general are volatile and largely unpredictable with plenty of fud and disinformation floating around, not that different from the "bitcoin world".

I'm not saying regulation is working exceedingly well, just that some regulation is still better than none.

The sheer unpredictability of Bitcoin even bites those who try to use price manipulation to their advantage though at times.

Look at what happened with pirateat40, the "bitcoin savings and trust" ponzi scheme king who couldn't pay out one time and decided to try to try his hand at market manipulation instead.

Especially the part about people with no actual knowledge of a stock making guidance regarding its future, and people who want to manipulate the price of a stock incentivizing people who know nothing about a stock.

> 5) When you suddenly start paying attention to bitcoin because the price has gone up a bunch recently, don't buy it, because it's about to crash.

That's my favorite time to sell. Glad I sold at $900 when everyone was raving about it just a few weeks back.

That's an awesome sell, but didn't it get up to 1000$?

Well, when it was $1,000 one of my friends was waiting to sell until it hits $1,200, which it never did. The peak is only evident in hindsight. Still glad I sold at $900 considering I bought several years ago after the last crash.

~$1130 or something

> 1) It's a mostly unregulated market full of scammers and pump and dump schemes artificially manipulating the price.

How can you "artifically manipulate" the price of Bitcoin? By buying lots of it then selling? How can that be bad?

> How can you "artificially manipulate" the price of Bitcoin? By buying lots of it then selling? How can that be bad?

You can spread false news that could bump it in either direction. For example a government is planning legislation around bitcoin or (like in this case) a bank is looking closer at money flowing to/from exchanges. These could drive down the price. On the other hand stories about governments embracing it, a company starting to accept it, or more "positive" bitcoin stories could drive up the price.

I think the point of most pump and dump schemes is getting someone else to buy so that you can sell and leave others holding the bag.

Other scams are probably more like MtGox where the coins don't exist or are routinely stolen.

He addresses in his next points, by causing a news event that drives the price against the dollar up or down.

Number 3 and number 5 are a contradiction, won't you say?

5 was me being somewhat sarcastic. I see so many people on bitcoin forums saying something like "Wow, the price has really gone up, it's going to the moon now, I just spent my retirement betting everything on bitcoin with 25x leverage on some shady chinese exchange.

Then a week later they're on suicide watch because the price went down 5-10% and they lost everything.

On some level, it's just common sense. A bitcoin is a bitcoin. If bitcoins didn't suddenly become more valuable for some obvious reason, then if the price has doubled in a few weeks, then that makes it a worse time to buy, not a better one.

I will never understand why people suddenly want to buy something after the price has gone up a bunch, because the price has gone up. You want to buy it before. Obviously if the price went up because the reward halved or, i dunno, citibank started taking bitcoin deposits, that's a different story, but just jumping in because of FOMO is stupid. (I saw the same thing with Nvidia, and warned people out of buying it and sold most of mine to lock in profits after the hype train started getting out of control in the past few weeks.)

I agree with you. But it's ironic because what you are saying (educating people when you have already figured out a pattern that you could exploit) doesn't seem to be in your best interest. And sure the actual harm is nominal (people reading you HN comment) but...

So the price has just dropped, good time to buy it then?

Well it's a better time.

Only if it has dropped below its discounted present fundamental value (PQ=MV).

on a given day is the important bit.

I knew the housing market was going to crash, but I had no clue when. That's enough not to buy into a bubble, but not enough to make money from a bubble.

Not really. Knowing that it's going to crash is different from knowing why it's going up or down.

In particular, knowing that it's going to crash is just a standard observation about markets in general: If you buy because it's going up, you're already too late, and you're likely to lose your shirt.

Number 5 is a recurring pattern on financial markets. But it tells you nothing about timing, and there's always the "this time is different" risk that although low can easily eat all of your money.

Or, in other words, #5 is a recurring pattern on financial markets. If you rely on it alone for investing your money, you are crazy.

I'm a fan of the term "narrative fallacy" for #3 https://wiki.lesswrong.com/wiki/Narrative_fallacy

> Nobody on the internet who claims to know why the price of bitcoin goes up or down on a given day has any fucking idea what they're talking about,

> don't buy it, because it's about to crash.

This seems rather contradictory.

Re point 5

Pay attention to the "bitcoin " Google trends graph and overlay it onto your bitcoin price chart of choice.

The problem is Google trends lags two days behind, so it doesn't give a clear picture of "now" interest

Regarding number 4, are you sure it's not the other way around?

Both of you are right. One does not exclude the other. Bitcoins having value creates a demand from merchants, who want to accept them and sell them for USD, and drugs being available for bitcoins creates a demand from consumers, who buy bitcoins and send them to merchants.

If the Bitcoin market consisted solely of drug trade, it would constitute drug sellers selling bitcoins to drug consumers on exchanges, only to again receive the same bitcoins shortly thereafter, as payment for drugs.

> 4) As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

How does that turn around?

I think they mean this: As long as bitcoin is worth something, it's going to be useful for criminal activity.

yeah this is what I meant.

3) I thoroughly disagree as there are clear and consistent correlations of Bitcoin price to certain events, such as news of Yuan devaluation. Of course correlation /=/ causation, and especially as this is a very low barrier of entry trading market, it creates incredible randomness/volatility.

To be perfectly honest, your rhetoric just seems to spread FUD, when the real truth is there are simply a lot of unknowns, and a lot of people who claim to know them, and you need to use your best research and judgment to sift through the noise.

6) after a crash and bubble is the perfect time to buy :)

Is there any good source for knowledge on what's affecting the price of Bitcoin and other cryptos?

Where can someone learn about this stuff?

Basically, where Bitcoin is at now, by looking at just the price, it's impossible to tell whether an exchange has been hacked, a major government is banning it or some guy finally remembered his Bitcoin wallet password and cashed out.

The people that know what affects the price of bitcoin own a lot of bitcoin, and they know what's affecting the price because they're moving the markets themselves.

1) It is attractive because it it unregulated. The inflation however is mathematically guaranteed. That is perhaps the best regulation you can ever have for a currency.

2) True about USD and Fed too or almost every other things that are publicly traded. The reason Musk makes all those news headlines is because he wants his company look attractive too investors.

3) True about stock market and all other financial instruments too. We have plenty of analyst giving after the fact analysis. They have no clue.

4) Agreed.

5) Generally true about stock market too. One should always buy low and sell high. Not other way around.

> The inflation however is mathematically guaranteed.

You mean "deflation". Inflation is when your currency is worth less than it was before.

Also, I'd be careful of claiming anything is "mathematically guaranteed", which is a much stronger claim than anything you encounter speculating in a market. There's no axiom or theorem demonstrating that Bitcoin is worth anything.

Sorry. My point was protection from inflation is guaranteed. Bitcoin might lose its value because of market but no one can print Bitcoins at a whim to reduce the value of coins in my hand.

Just asking for fun, as I'd never bet my money on it, but is there any way to 'short' bitcoin today?

You can buy put options on deribit.com (with a huge spread, mind you). https://www.deribit.com/main#/options

It's effectively shorting selling, except you know in advance how much you stand to lose (what you paid for the option), as opposed to borrowing bitcoins and selling them, and then having to buy them back at some unknown price in the future.

Unlike futures (say a 2 year crude oil contract), you can only short bitcoin for day-trading. The trick is that in most exchanges you pay a huge fee everyday to hold your position. So you can't say, "I think Bitcoin will crash in 2018" and open that position. In a few days the fees eat up everything and you are forced to liquidate at the price that day. (see bitfinex, whaleclub, etc, etc)

That's not necessarily true. I work on BitMEX, and we offer quarterly futures contracts that don't have holding fees. Today, with the price movement, they've been even trading at a discount to spot.

You can do all kinds of crazy bets with bitcoin, and do it leveraged up to your eyeballs. People do it all the time.

You can short Bitcoin at Bitfinex and ICBIT.

Wasn't Bitfinex hacked?

So basically just like any other financial asset.

> As long as bitcoin is useful for buying drugs or another criminal activity, it's going to be worth something.

That's a tautology, isn't it? People found the German Papiermark useful for criminal and non-criminal activity, which meant that it was worth something. Until it wasn't.

An old billionaire who has been around long enough to see fly-by-night scams come and go, Charlie Munger, called Bitcoins "rat poison". The only problem with that is the commodity of rat poison has some actual value.

In the past 20 years we have seen various things with inflated values. Homes with sub-prime mortgages in 2007, stocks like Webvan and Pets.com in 1999. Bitcoin, which is trading for $775 now, and was worth $1020 last week, is one with those things, as well as with Dutch tulip bulbs and the like.

Comparing a Bitcoin to any other commodity, I have to ask, what use value does it have? It has none. Gold is useful because it can fill teeth, conduct electricity etc., I can also easily use it to trade as a currency as it is durable, portable, divisible and uniform. Bitcoin is traded, but has no underlying usefulness like other commodities.

Sometimes people fish around for a comparison to something with worth and are hard up for one until in desperation they point to the only thing they can - the dollar. True, the piece of paper dollar never had intrinsic value. Until August 1971, it was convertible to gold. The US did and does store thousands of tons of gold at Fort Knox and in other places. In 1971, it temporarily (with exceptions for some people) stopped that convertibility. So the dollar now is doubly abstracted, it was an abstraction of the gold, then with the window closed it became an abstraction of that abstraction. The US pays a lot to guard those tons of gold that still implicitly (instead of explicitly) backs its currency. Bitcoin does not have tons of gold implicitly backing it. It is inherently worthless.

But the value of Bitcoin is that it is durable, portable, divisible and uniform - and basically in limited and predictable supply (unlike the Weimar Reichsmark or the Hungarian pengo.) That's what makes it useful. Why does a currency need to have other "functions"? Its usability as currency is its underlying usefulness.

Lots of perfectly reasonable and useful modern 'paper' currencies are not backed by any commodity nor have been since their most recent introduction. Money is useful as money, that's generally good enough.

Most reasonable paper currencies are backed by the fact that millions of people need to pay their taxes in that currency. That's generally what gives fiat money value.

I wouldn't quite agree that tax requisition is "the thing" that gives a paper currency value, though of course it is one. (I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.) But my main point is that it's not commodity backing that matters, and that currencies don't need to have "intrinsic value" in some other use than as currencies.

In any case, I find it kind of amusing how much incensed criticism Bitcoin gets simply for being a currency that exists. It's like, imagine people wrote thousands of angry, scathing articles and comments all over the internet about the Azerbaijani manat or something.

> I mean, lots of people/companies hold USD, EUR, CHF, JPY, etc., without ever needing to pay taxes in those currencies.

I don't think vkou was claiming that you yourself need to pay taxes in the currency yourself. Just that the fact that there's workers out there in another country who needs to pay their taxes in their local currency and will therefore need to charge for their work in that currency or trade for it. Either option will lead to some predictable demand that you can depend on whether you pay taxes in the country in question or not.

All cryptocurrencies are durable, portable, divisible, and uniform. Nearly all of them will be worthless, and many that were already created and possess those four characteristics are already worthless. Bitcoin may escape that fate (I own a a fair amount, so I hope so), but it won't be because of those four traits.

Sure, most cryptocurrencies will probably fail over the long run. But the comment I was responding to was asserting that Bitcoin would fail because it lacks "underlying usefulness" or "commodity backing". I disagreed with that concept of money - but I didn't say that possessing the aforementioned properties of money would ensure that Bitcoin, or any currency, would not fail.

Bitcoin has value because you

1. Can buy drugs with it


2. Can avoid capital controls imposed by your socialist country

Fisher's equation describes the value of any currency - even gold - PQ=MV.


As relevant as ever

I wouldn't be surprised. Won't be an existential issue for Bitcoin though (beyond the temporary 2-5x price drop). Bitcoin doesn't need national approval to succeed. It will thrive in some jurisdictions and not in others.

Nation states have the most to lose, since they draw so much of their power from the ability to manipulate currency, so we should expect to see a lot of attacks on Bitcoin by them.

Nations can prevent their banking systems from interacting with exchanges. It should be easy enough to transfer value to citizens of restrictive countries regardless of the government's position; the trouble is the citizens' ability to transfer value out.

Banks are just one of many ways to get credit denominated in Bitcoin.

The point of Bitcoin is that your cousin Lenny can act as your bank.

Your cousin Lenny had to get his BTC somewhere, with either an exchange or a mining rig in the path. States can make both of those paths very difficult - paying the exchange could require smuggling cash out of the country, and anomalous electric usages are already used to identify marijuana grow operations.

Note to self: Start rumor that china is banning bitcoins before buying any.

That's very clever. Thanks for sharing.

How about a check on foreign realestate investment? I have a fantasy where China starts looking into homes its nationals own throughout the Bay Area in search of lost revenue, wherein the prices collapse because of a selling frenzy.

The reality is that many of the foreign-owned homes here are owned by shadow offshores which are very hard to track.

Do you really think China has a bigger impact on bay area housing than overpaid tech workers funded by venture capital?

As someone who recently bought a house, yes. We lost two houses to people who were bidding cash, even though they bid at a slightly lower price (cash closes fast). One was Chinese and the other was Russian. It makes the local tech workers paying with loans try to top the foreign bidders. But by the next sale the foreign buyers are bidding even more because they are sitting on piles of cash and can afford to do so. It's a real effect that every single person in the real estate industry we interacted with commented on.

Also, you're giving yourself away as an outsider because VC-backed firms significantly underpay compared with the profitable tech giants.

They don't need to have a bigger impact. A secondary cause shifting radically could easily affect the market noticeably, especially in specific segments.

Btw, tech workers from venture backed startups generally make less than those working for the profitable tech giants, so it's a bit disingenuous to call them overpaid.

Overpaid tech workers are a tiny sliver of the population of the bay area. There were very wealthy people in SF long before Twitter moved there.


Usually, when people from another country buy something in our country, we call it an "export" and cheer it on. In this case, because housing construction is limited, we consider it a bad thing. What if instead, we allowed developers to build more housing to sell to those foreign buyers? So we could not only have enough homes for locals, but also improve the national trade balance.

Imagine if we only allowed American car companies to build 1 million cars per year, and them complained about the damn Chinese buying up all the cars.

There is still only a limited amount of space in the attractive parts of a city, even if you are allowed to expand the city freely.

There is a limit, true, but that limit is 60 story high-rises. I doubt foreign demand would hold up very long if we built a few of those, but in any case, the union construction jobs, the aggregate demand, the development fees, and the letup in competition for ordinary housing would all be welcome.

It is an interesting problem, since the construction of said high-rise buildings would itself affect the value of property in the area for many reasons (beyond just the increase in the supply).

Do you have any hard numbers or sources? I hear this claim repeated online, but it feels like a stereotype. Is there actual data on what percentage of real estate transactions involve a foreign buyer?

> For the fourth year in a row, buyers from China ranked first among foreign nationals purchasing property in the United States, according to a survey by the National Association of Realtors (NAR). U.S. home sales to Chinese nationals totaled $27.3 billion — exceeding the total dollar sales figure of the next four countries in the rankings combined, the survey showed.


In San Francisco Bay-area locations such as Palo Alto and Woodside, home prices have risen by double digits in the past three years, while the number of buyers from China has nearly doubled since 2012, says Penelope Huang, a broker with Re/Max Distinctive Properties. The increased demand is making the area one of the toughest for younger buyers, she says.


Being the largest in a small pool doesn't mean a lot.

What % of the total home sales are to foreign residents in the bay area, and what % of those are Chinese?

I think you'll find it's very likely less than 5% - not nearly enough (imo) to move a market enough for it to "crash" if they were to pull out.

"McLaughlin estimates that buyers from China account for 15 to 20 percent of the San Francisco real estate market."


They're also bidding 10-20% cash over the asking prices of homes, because they still save money on paying 45% income tax.

This is affecting the entire market because housing is a fixed supply. Buyers who are getting outbid on one price point move to outbid people at a lower price point, and so on.

Or they don't. It's not like someone who is outbid on a mansion _automatically_ decides to buy a townhouse.

They don't _automatically_ do anything because the usual home buyer bids 7-8 times before getting a purchase. A mansion goes to large home, large home goes to home, home goes to townhome, townhome to condo, condo to keeps renting.

This is fixed supply, with foreign entrants, which means new home buyers that invested into planning, saving, and starting the process aren't going to just keep blowing money on renting because their first home is a townhome.

Citation needed.


>Buyers who become frustrated tend to shift from looking in popular urban core neighborhoods to suburbs where competition is less intense, or from single-family homes to condos

Try buying a home here, you'll see.

When I was doing this, I made ~ 15 offers. In all but one I was outbid by a cash-only no-inspections no-conditions offer from china, with the buyer not even present in the country - represented by agent only.

> Do you have any hard numbers or sources?

I keep on hearing the same thing that Chinese are buying property in Melbourne(Aus) as well. Do I have any hard numbers, no but what I have observed that many "For Sale" boards also have the information written in Chinese Script.

Make your own conclusions.

China should simply go into another jurisdiction and start investigating it's nationals? It doesn't work like that.

They already have an annual limit of $50,000 that can be transferred out of the country, they also ask foreign countries for help in identifying corrupt officials and individuals transferring large amounts out of the country, rich Chinese have strategies to avoid the law.

In my own country i've seen that request largely ignored. The benefits are simply too high, the Govt here is well aware that sizable portions of this money is likely dirty money, but the bottom line for the economy eases that discomfort.

The push to crack down on foreign housing investment in cities across the world lately has been driven by angry locals and soaring house prices, despite the Chinese govt asking for something to that effect for over a decade.

>The benefits are simply too high, the Govt here is well aware that sizable portions of this money is likely dirty money, but the bottom line for the economy eases that discomfort.

The money isn't 'dirty'. It might be breaking the Chinese government law against transferring more than $50,000 worth of currency out, but that doesn't qualify it as dirty. The law is an infringement of their citizens' right to control their own money. Just because the Western democracies have similarly authoritarian laws these days doesn't make them just and people breaking said laws the equivalent of a corrupt official moving the proceeds of bribes overseas.

One word: LONDON

And Amsterdam!

It's unclear what will happen, though it's possible China's moves long-term will increase Bitcoin's value because they'll use it as a financial tool both within China and outside of China.

Given that China warned the miners of their intent in advance of the public disclosure, there's reason to speculate they did this to partner with them to control Bitcoin.

> Given that China warned the miners of their intent in advance of the public disclosure, there's reason to speculate they did this to partner with them to control Bitcoin.

How so? The worst they can do is mine empty blocks. This doesn't constitute controlling Bitcoin, but rather executing a continuous denial-of-service attack against it.

No, the worst case is that they require their population to go through approved exchanges and to only use government issued Bitcoin addresses assigned to each individual.

Oh, right, I see. Control Bitcoin as in control the use of it within China.

I'm sure they can prevent the open use of Bitcoin in China, if that's what they want. But it seems to me that if people really are using it to avoid capital controls and/or Yuan depreciation, preventing consumer-to-merchant transactions isn't going to change that.

This is about controlling consumer to exchange transactions in China.

And yet the market dynamics of that wouldn't be all that bad.

They'd never get 100% of the blocks, so all they'd be doing is slowing down the flow of transactions and increasing the fees (because people would be paying for fewer spots in the non-DoS blocks, which would incentivize other miners.

Bitcoin scales fees, instead of scaling transactions/second, so for a while it wouldn't be economical to use it for small purchases where the fees would be almost as much as the price, but for larger purposes, and as a store of value, it'd work just as well.

I agree that it wouldn't be all that bad, but I disagree that they can't cause a complete standstill if they want to. If they have more than 50% of mining power, they simply refuse to build on top of the honest blocks (from the rest of the network). The clients will follow the longest chain.

However, it's a costly attack to maintain in electricity alone -- with a dwindling income, since your income is denominated in the currency you're attacking -- and it wouldn't take that long for bitcoiners to get sufficiently pissed and change the hashing algorithm, thereby disarming this attacker completely.

If the goal was to cause a complete standstill, then they wouldn't need to take over the mining, all they would need to do is flood the network with transactions with minimal fees. Not hard to do for someone who manipulates currencies and has large cash reserves.

The miners would keep mining but Bitcoin users wouldn't be able to get a transaction through unless they paid a large transaction fee.

Not necessarily "large", only larger than the "minimal fees" you mentioned earlier.

Using just over 4 million antminer S9's at 3.2 cents/kWh (bulk cost of coal power) to generate the 1,350,000 TH/s required to get 50% control of the network would cost you $3.8 billion over a 3 month time period.

At 7 transactions a second, it would take 54 million transactions to flood the network over a 3 month time period, meaning you could spend $71 on each transaction fee.

If you wanted to stop the bitcoin network and wanted to save money on the attack of mining, you could force everyone to make a "minimal" fee of up to $71 to make one Bitcoin transaction.

As the costs of mining increase, this is only going to increase as well.

Bitcoin is also traded off-network so the market would remain liquid and you'd be paying miners an extra $300,000 per block so they could easily afford the transaction fees to settle large amounts.

You'd just make Bitcoin a reserve currency.

Sidechains still require the bitcoin network to validate eventually, otherwise they are just another payment system. They also don't scale with users.

Ethereum & Monero have become popular enough that most people would just switch to that rather than go to lightning. Then the whack-a-mole begins.

Yeah, and the cost to do that in this scenario is $72. Comparatively expensive, but you're flooding the network with money...

Anchoring a sidechain just increases the resources needed to tamper with it, as if it itself had a higher proof of work. It doesn't need to happen every ten blocks or any set number. As often as possible is good enough. Sidechains can even have sidechains. If the $72 was too expensive that chain can support hundreds of other chains anchoring into it, spreading the costs.

But most people would still just use exchanges and as long as the exchanges settle often enough that their government-mandated floats cover the difference, what do they care if the underlying network itself is slow?

Again, side chains do _not_ scale with users.

On a side chain, 10,000,000 transactions between 2 people costs $72 and takes ten minutes, but 2 transactions between 10,000,000 people costs $72,000,000 and takes over a month.

"Most People" in the market for cryptocurrencies will just switch to ethereum or monero.

> "Most People" in the market for cryptocurrencies will just switch to ethereum or monero.

That's fallacy one - assuming nobody notices the attack and realizes that if one coin falls, the next could too. You can't assume an unaware population. This isn't politics, people are paying attention because their money is on the line.

Also, in this scenario you're dumping a ton of money into the coin to make it die ... that provides a tremendous pressure to make it live.

> Again, side chains do _not_ scale with users.

This is a blanket statement that may apply to one or more pathological sidechains, but does not generalize.

The scaling of sidechains depends on the structure of the chain, trust requirements, and other usage decisions. This is utterly independent of what it's linked to, and only partly related to how often you link to the upstream chain.

> On a side chain, 10,000,000 transactions between 2 people costs $72 and takes ten minutes, but 2 transactions between 10,000,000 people costs $72,000,000 and takes over a month.

lmftfy - "On X sidechain design ...."

Which fallacy is that? The "fallacy" of substitute goods?

Burden of proof is on you at this point. Maybe in your haste to cry fallacy you just forgot to mention an actual Bitcoin side chain that would be competitive with Ethereum or Montero in that situation?

> Which fallacy is that? The "fallacy" of substitute goods?

That your opponents won't notice this happening to the first currency. You're trying to starve the system with billions of dollars of transactions!

You're discussing taking on the coins in order, but you only get one element of surprise.

> Maybe in your haste to cry fallacy you just forgot to mention an actual Bitcoin side chain that would be competitive with Ethereum or Montero in that situation?

No, I did but you didn't notice. The off-network exchanges. They're already what 90% of coin holders think of bitcoin as, so they wouldn't notice or care that big transactions between exchanges took a long time to settle. Like I don't care where or when my physical bank trucks the paper money.

Also, the $1B / month you're injecting would fund a lot of work on the ecosystem.

> Burden of proof is on you at this point.

No, it doesn't swap back and forth every post. When I discount your vampire-bats plan by pointing out the sun, I don't suddenly have to prove the existence of the sun.

That's not a formal or informal fallacy. In fact, I'm really not sure what you're getting at with "elements of surprise". Maybe explain more?

Again, off-network exchanges still require the network to verify, which means they don't solve the scalability with users (same as side chains).

You do need to prove that pink unicorns exist by giving examples, rather than describing it.

> Again, off-network exchanges still require the network to verify,

I'm referring to totally off-network exchanges. Most people (sadly) are happy to own bitcoin via an intermediary. They wouldn't notice this attack at all.

And the exchanges, settling 10,000+ bitcoins at once, could easily pay any plausible transaction fees, so nothing would even grind to a halt.

The attack would prevent me using the local Bitcoin vending machines for $4 purchases, but wouldn't impact the overall settlement of large amounts.

> I'm really not sure what you're getting at with "elements of surprise".

You say people would migrate off Bitcoin because of the attacks. But really, people would detect and analyze the attack and recognize the intent. They'd make informed decisions in how to respond, given that an adversary of this class wouldn't be likely to give up with only one currency destroyed.

> You do need to prove that pink unicorns exist by giving examples, rather than describing it.

The only reason to believe that all sidechains must scale badly is one unsourced claim of yours, based presumably on your examination of a subset of the ones that exist. If you care to present a broad proof that the entire concept is impossible, go for it.

Today's mining software already ignores transactions like this. Miners select the highest paying transactions first. When the block is full they ignore the rest until the next round. This makes flooding the market expensive.

>Not hard to do for someone who manipulates currencies and has large cash reserves.

Sure you could push the transaction cost up for a little while if you're into throwing money away.

It's not throwing away if you were going to flood that currency anyways, and just used BTC instead of gold as the intermediary.

I did the math above, and if you wanted to save money on attacking the network with your own mining, you could spend up to $71 per transaction on every transaction.

You must not be very good at math.

Well then I hope you correct it, Joe.

From the article: "Trading between the yuan and bitcoin accounted for around 98 percent of the total market in the past six months." Yes, it's people getting yuan out of China.

The big question for the last few years has been whether China would loosen capital controls, or tighten them. The decision seems to have been "tighten". Bitcoin is now a big enough leak that the People's Bank of China is starting to do something about it.

China deliberately allows some leaks. You can take about $50,000 to Hong Kong in cash per person once a month. Sending all your relatives to Hong Kong every month, loaded up with cash to exchange, has been popular for years. But that only works if you have relatives near the border. Bitcoin was tolerated as a leak, as long as it didn't get too big. That may be changing.

> From the article: "Trading between the yuan and bitcoin accounted for around 98 percent of the total market in the past six months." Yes, it's people getting yuan out of China.

I don't at all agree that this is evident.

BTC China has zero trading fees. All speculators go there to cheaply trade bitcoins. Volume is no indicator of anything, except the speed of their order matching engine. Bitcoins bidding on Yuan, and vice versa, is the important metric, and judging by it, the Chinese market is insignificant compared to the USD market (bitcoincharts.com/markets has order book depth by exchange).

Well, there is SOME reason why Bitcoin spiked recently- It seems almost like it's due to an organic reason, since the speculation environment hasn't changed much in the last year to account for a large change- So far, the best theory to account for the spike I've heard is Chinese capital outflow. (Though it's always possible it's entirely due to "animal spirits of the market" and has no fundamental reason)

remember when Jamie Diamond said "all the action is in gold and bitcoin"?

that's when this recent spike started.

It's easy to see that this is not the case.

Using bitcoin to evade capital control doesn't push the bitcoin price up, because you BUY bitcoin in China, but then you SELL it outside China. So the net effect is pretty much 0.

Only by HOLDING bitcoin can the price go up.

No, because you are buying and selling in different currencies. That will on equal out if the volume is enough to move the Yuan/USD direct exchange rate (and it's not).

So you're saying that there is no arbitrage going on between the bitcoin price in different currencies/exchanges.

So be the first one to write such a bot, you'll make millions...

Out of all "leaks" it is by far outnumbered by companies openly advertising transfer services. Work around DT Shanghai and you will see them everywhere, and one right to a procurator's office.

The entire market cap of Bitcoin ($12 Billion) is less than 0.5% of China's national foreign exchange reserves. This is not significant in anyway towards capital flight.

The volume you are talking about is from "Wash trading", where you buy and sell back and forth between two exchanges at 0% commission to maintain your position as a high-volume trader.

That no articles reached the front page as the price was rising says a lot about HN's general opinion of Bitcoin.

It was on HN's front page 7 days ago: https://news.ycombinator.com/item?id=13320198. There does seem to be a lot of schadenfreude when it comes to Bitcoin though.

Notice that article got 58 points whereas this one is currently at 163.

So why Bitcoin is so big in China?

It's not that big in China, necessarily. The reason people assume it's big is because the large Chinese exchanges offer fee-less trading, whereas the Western exchanges usually charge 0.2% or so. This causes all the traders to move to e.g. BTC China, and their volume to be 50x that of the US exchanges.

Some people interpret this as Chinese people buying bitcoins, but if you look at the order depth of the Chinese exchanges, it's clear that the USD Bitcoin market is much more liquid (by at least an order of magnitude), and the Chinese exchanges may just be used primarily for cheap speculation/day trading.

Personally, I think the Chinese market is insignificant compared to the USD, and that the PBOC shouldn't have any effect on the USD price, so I've been buying call options throughout the crash.

Isn't at least part of the depth of the USD market relative to the yen market because a lot of the Chinese volume is driven by people that (i) ultimately want to obtain USD and (ii) spend their yuan on mining equipment?

> [...] because a lot of the Chinese volume is driven by people that (i) ultimately want to obtain USD and (ii) spend their yuan on mining equipment?

I guess I'm saying that I don't buy this narrative. "Chinese volume" is people from all around the world trading on BTC China. Anyone can open an account there, not just Chinese people.

Where do you buy your options?

People are trying to pull their money out of China, and in the process need to exchange Yuan for foreign currencies. China does not like this, because it causes inflation among other things, so it puts restrictions on exchanging Yuan.


Bitcoin is a way around this. If you are Chinese and can afford big clusters of bitcoin miners, you can mine bitcoin and exchange it for people's Yuan at a higher and higher price, driven by demand to pull money out of china.

"People are trying to pull their money out of China"

Meh. This is the classic story that mainstream articles about Bitcoin almost always repeat over and over. However on multiple occasions CEOs of Chinese Bitcoin exchanges have said they don't believe it to be true, based on how their users use their exchanges. In reality the Chinese just appear to like to invest/gamble/make quick returns more than Western markets. That and a combination of other factors (somewhat more lax domestic financial regulations + large market of 1.4 billion people + due to competitive reasons Chinese exchanges offer 0% trading fees + ...) leads to a bigger and more active Bitcoin trading environment in China.

Are the mainstream articles' claims less likely to be true than the statements of CEOs of Chinese Bitcoin exchanges that have pretty strong incentives to talk up the portion of their business that their regulators are less likely to be concerned about?

Your point is legitimate. However, if the Chinese trading volume (buys) was primarily caused by money flowing out of the country, we would see a correspondingly high trading volume overseas (sells). But we don't.

Isn't there also no trading fee on the large Chinese exchanges? That's a pretty big bonus I think.

> In reality the Chinese just appear to like to invest/gamble/make quick returns more than Western markets.

Anyone can create an account on BTC China and trade with zero fees. It's a gambler's paradise, regardless of nationality.

There is a grand total of $2 billion per year, worldwide, to be made in Bitcoin mining. This number will probably only go down.

The Chinese economy is $11 trillion. I don't think Bitcoin mining really shows up on their radar.

Now, Bitcoin trading... that can make a dent. A single block of a few thousand Bitcoins can circulate a hundred times a year and move many billions of value out of a country. It's also far harder to detect than a mining facility.

The entire market cap of Bitcoin ($12 Billion) is less than 0.5% of China's national foreign exchange reserves. This is not significant in anyway towards capital flight.

Because China is full of cash that can't be used. People may have lots gray money but can't use it.

It's not uncommon to see news where normal traffic accident turns into corruption investigation whey police discovers that lorry involved in the accident was full of cash being transferred. It's permissible to have only ~$50,000 in cash in China.

Bitcoin is still small potatoes in China and elsewhere. Hong Kong banks, underground banks (shadow-bank uses checks drawn on overseas accounts) are still the main gateway to launder money offshore. They move hundreds of billions per year.

The really rich people use overseas mortgages. Buy a house in LA, use yuan deposits and other assets on the mainland as collateral.

I'd suppose it's a fairly easy way for ordinary people and small investors to subvert capital controls.

Government recently imposes new regulation on how much money each individual could exchange from YUAN to Dollar each year(50k usd, to be specific), that explicitly prevents the exchanged currency to be used in investments such as real estate and US stocks.

This might increase the speculation that Yuan will devalue even further this year. Bitcoin is currently harder to regulate and could be use a way to send money oversea, bypassing the 50k quota. But honestly, I don't think there are a lot of them though. Maybe someone just tries to ride the trend.

China has a lot of people which would make it a big market in any environment, but they also have capital controls so BTC is an easy way to get money over the border. This is also one of the reasons why Chinese nationals have been gobbling up foreign real estate.

There should probably be more than one answer to that, but one of then is that Chinese people love to gamble. I believe that's because gambling was not traditionally frowned upon in China like it was in the West.

An enormous portion of Bitcoin that is continually mined comes from China due to cheap electricity, so that + artificially inflated Yuan means a lot of activity.


Bitcoin is dying again...

seems like this happens a lot.

So glad I cashed out the little BTC I had at $1,060/BTC a few days ago.

Why are you glad about that? Also when did you buy them?

Quite a while ago (maybe 4-5 years ago). I actually didn't buy them, I mined them. In fact I had totally forgotten about it until I saw a news article stating BTC had shot up to $1000+.

>Why are you glad about that?

Well, I don't expect it to raise back to USD$1000+ any time soon (it's ~$740 now).

I have some mined coins from 5-ish years ago, but it was on such an old bitcoin client I haven't been able to show proof of work in order to transfer them out of that wallet, and it seems to be pretty difficult to recover an old wallet, especially when I'm paranoid that the data will be snatched as soon as I reconnect that old computer to the internet, since the bitcoin client was so old it didn't have proper protections in place.

I really should have had it all figured out so i could take advantage of this run, but I didn't. Now I'm kicking myself. I wasn't ready the last time it shot up over $1k/coin either.

You don't have to reconnect the computer to the internet to get access to the bitcoin in that wallet actually. You should be able to get the private key from from the wallet.dat file and then just import it to a new client.


If you end up getting rich, feel free to transfer some btc to 1P471RQS4Ga2xgakQWgbDL8WLajwPEdfMH as a thank you :)

Okay cool. I did try doing something similar before, by taking what appeared to be the private key out of the wallet.dat file and importing it elsewhere, and it showed my balance, but it wouldn't let me transfer the coins without 'proof of work'. I read online and I was lead to believe that I needed something more than just the private key for original mined coins in order to transfer them.

And I won't be rich, unfortunately. I only left it on for only a week and mined a single block, back when you could actually do so from your home computer. If only I had left it on for a couple of months back then I would be rich, though. This will only help me dig out of debt and maybe make a downpayment on a house.

As far as I know the private key should be enough, I wonder if it was an issue with the client you were trying to import them to.

Anyway, one block is still pretty good as far as getting free money goes! Best of luck recovering them.

I'm certainly not complaining, assuming I eventually can get these coins sold, and preferably not in the middle of a downturn. Not really looking forward to taxes taking a chunk out of it, but whatever. I'm just glad I don't have to stare at a ~$220/coin for months on end and saying to myself "If only I had sold when it was $1k a coin..." like I did two years ago.

Use the dumpprivkey command on the old wallet. Install a new wallet on your new pc. Use the command importprivkey. Then you can transfer the coins to an exchange, assuming the website you pasted your privkey into before didn't steal them.

Long term capital gains tax is 15% in the u.s.

There's absolutely nothing to worry about. There aren't remote exploits in old versions of bitcoin. In any case, you can download a new client from bitcoin.org and run that with the old wallet file.

Can't you load the latest client and then import your old wallet?

Supposedly it's more complicated than that for wallets made with old clients.

You've heard of "buy low, sell high", yes?

Why should any private entity or group or technologists seek to control money? Money is the most important instrument in a society and must be under societal control operating within the proper framework of systems, accountability and rule of law.

Given that bitcoin origins and management is completely nebulous and its proponents deceptively promoted and continue to promote it as some freedom libertarian thing when its closely controlled and in the end simply a way for early adopters to cash out.

Early and greed fuelled adopters incessantly moan about a flawed banking and monetary system. Even if we accept their criticisms at face value how is it reasonable to then turn around and promote a 'solution' that has zero accountability to anyone and based on a inefficient system that shamelessly wastes electricity? This seems disingenious and self serving.

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